Eight Reasons to Hire a Business Broker when Selling Your Business
Below are some of the benefits of using a business broker.
- Maintain Confidentiality: At Lakes Business Group, we protect the identity of our clients. All our prospective buyers sign a confidentiality agreement before seeing a business profile. Some of our clients ask us to run the buyer’s names by them so they can approve before disclosing the business profile.
- Determine the best selling price: Every business is different, with many variables that have an impact on the value. Our team has access to databases that can be used as reference points as well as the experience of ten years plus in business valuation and selling businesses. Being a ‘third party’, we can see the business from a buyers’ perspective.
- Marketing: Because all we do is business acquisitions, we know where and how to market for your company’s business. A business broker will know what to highlight in your business to find the right buyer. Our team will create the business profile for your business. Usually a full business profile is only for those who have signed a confidentiality agreement. We also prepare a ‘teaser’ sheet that is more generic for marketing your business without giving confidential information.
- The business owner can continue to run the business. An owner’s lack of attention to running the business can cause business performance to suffer.
- Qualify and Screen Buyers: Lakes Business Group has been doing this for over 10 years and have a database of over 20,000 vetted buyers. We’ll introduce the buyer candidates to the sellers after they have been vetted.
- Mediate and negotiate with buyers and help the buyer to obtain financing.
- Receive purchase offers to present and help evaluate them to the sellers.
- Manage the Due Diligence Process: When the business is under agreement, the buyer will want a thorough due diligence of the financial and legal aspects of the business.
Begin with an Exit Plan
As a business owner, it’s never too early to think about an exit plan. Reading the summary from the book Seven Habits of Highly Effective People, the author, Steve Covey says “begin with the end in mind.”
One reason to have an exit strategy is it keeps you on task to grow your business, so when it’s time to exit, you’ll have an attractive business for buyers. Another quote from Stephen Covey’s book is “Changing our habits to improve what we are can be a painful process. It must be motivated by a higher purpose, and by the willingness to subordinate what you think you want now for what you know you want later”.
Below are some questions to ask to help you prepare for an exit strategy:
- What will make your company attractive to a buyer?
- Is your company growing?
- Is your business dependent on you?
- Do you have a strong management/leadership team?
- Is your team able to handle the day to day operations of the company?
- Are there systems and structures in place for running the business?
- Are your financial records in order and up to date?
As you answer these questions you’ll see how you need to start preparing your exit plan so you can maximize the value of your business when it’s time to sell. This can be overwhelming, so start small by changing one thing. A question to start with is, is there one thing you can do that you aren’t doing that would make a difference in your business?
Our experienced team can help with getting an exit strategy in place for your business. Getting the a business valuation may be the first step to see where you are at and how to improve.
2018 – Right Time to Sell your Business?
Optimism for small & medium business owners is strong. According to a National Federation of Independent Business survey released last week, business optimism is reaching an all time high. This is the highest since 1983; small business optimism has not been this high since the Reagan economy.
Because of the strong business climate, 2018 may be the right time to sell your business. When you do plan to sell, here are some ways you can help in the process:
- Be Friendly and cooperative: When the buyer asks for information, provide it to them in a timely manner. This helps with building trust and gives the impression that you have nothing to hide.
- Communicate openly and honestly: Most transactions are closed in a timely manner when trust and good chemistry exist between the Buyer and Seller. This is built through honest, open communication.
- Avoid being defensive: Buyers may ask personal questions, but rarely are they intended to serve any purpose other than gathering needed information for a Buyer to make a decision.
- Help the Buyer see himself/herself as the new Owner: Let the Buyer know they are capable of successfully managing this business.
- Make your Business a Showplace: First impressions count! A Buyer may draw conclusions about product quality and the organization of the business based on the appearance of the facility.
- Be candid and optimistic about growth opportunity: A Buyer will look at the business from the perspective of managing and improving it. Help the buyer understand the opportunities and allow them to see the upside potential.
- Make Yourself available: Once a buyer has been identified and qualified, plan meetings when you will be available and not have a threat of having to cancel or being interrupted. This is critical as the due diligence process begins.
- Keep Financial Records Current: When a Buyer has to wait weeks for the Seller’s accountant to prepare financial statements, the enthusiasm to move forward is usually lost. When you decide to sell is the time you should notify your advisers of your intentions and explain that you will require their services in a timely manner.
- Understand the Emotional Roller Coaster: There is no way to avoid the emotions you will experience as you go through the due diligence and sale process. You have poured yourself into this business the past number of years and you need to keep reminding yourself the reason for selling. The Buyer will also experience emotions as he/she goes through the process.
- Create a team of professional advisers: Have a team of qualified transaction-oriented professionals who understand that your goal is to sell the business in a timely manner. Bring them into confidence early in the process so there are no surprises.
- Continue to focus on your business: It is easy to let the enthusiasm about the sale distract you from running your business. It’s important that you continue to focus on “business as usual” so that the business remains healthy and vibrant during this critical time. A Buyer wants a business that has been well managed right up to the sale. Do not postpone or ignore critical decisions.
These points are taken from an article written by Adam Petricoff from the VR Office in Charlotte, NC.
Doing Business in 2018
Knowing the trends helps us to prepare as we continue to grow our business so that when it’s time to sell, the business is still relevant. What are some of the trends for the coming year? Following are a couple of 2018 business trends that have been coming up in articles the past year.
1- the Experience economy: With the Millennials having more say in our economy with their spending dollars, businesses are catering to them. They want to experience an emotional connection. They are looking for organizations that speak to their reason and their emotions. They are looking for organizations with shared values. One of the examples is the State Street’s Fearless Girl statue. State Street Corporation, the $2.6 trillion asset manager, installed the Fearless Girl statue on Wall Street, agreed to settle US allegations that it discriminated against hundreds of female executives by paying them less than their male colleagues. “State Street is committed to equal pay practices and evaluates on an ongoing basis our internal processes to be sure our compensation, hiring and promotions programs are nondiscriminatory,” the company told Bloomberg.com.
As you look for goals for 2018, your business must find ways to be honest and transparent. Find ways to speak to the emotions and reason in your marketing – tell a story. One example of a 2017 television ad is the Audi commercial titled ‘Daughter‘ and the NFL commercial titled ‘Inside These Lines‘. Both of these ads tell a story through the images and the narrator that connect on an emotional level
2- Creating Shared Value. This is a trend that has been talked about the past few years. Creating shared value is the practice of creating economic value in a way that creates value for society by addressing its needs. An article written in October 2016 referred to this new era as Shared Values Economy. One of the examples is how businesses are partnering with non-profits; In 2015, the Starbucks Foundation assisted at least 5,000 smallholder Tanzanian coffee farmers and their families. In 2016 Whirlpool company partnered with Habitat for Humanity to provide washer and dryers for the homes built.
This article has highlighted just a couple of the trends that have changed in the past few years. There are many articles written on 2018 business trends. Below are links to three of them.
Do You Have a Business Exit Strategy?
Most business owners plan to sell their business to fund their retirement. It is the number 1 reason for business owners, followed by burnout and new opportunities. Yet, when it comes time to sell their business, less than half of all business owners plan ahead.
|Deal Size||#1 Reason||#2 Reason|
|$500 – $1MM||Retirement||Burnout|
|$1MM – $2MM||Retirement||TIE: Burnout/Opportunity|
|$2MM – $5MM||Retirement||New Opportunity|
|$5MM – $50MM||Retirement||Burnout|
|These stats are fom an IBBA.org article in early 2017.|
Business owners assume their business is salable, but that is not always the case. By not having an exit plan and understanding the value of your business, you are taking a huge risk. Even if you are not ready to sell your business, you should get an annual estimate value of your business. Lakes Business Group can help. Our agents work with businesses in all industries and can provide an evaluation for your business with industry comparisons to help you properly prepare ahead.
Five Business Exit Strategies
Entrepreneur.com has a article with five primary exit strategies available to most entrepreneurs, written by Stever Robbins. Following is a short synopsis of these five strategies.
1- Just Take It: One favorite strategy of forward thinking business owner is simple to bleed the company dry on a daily basis. I mean pay yourself a huge salary, reward yourself with a gigantic bonus regardless of actual company performance, and issue a special class of shares that only you own that gives you ten times the dividends the other shareholder receive.
2- the Liquidation: One often-overlooked exit strategy is simply to call it quits, close the business doors and call it a day. I don’t know anyone who’s founded a business planning to liquidate it someday, but it happens all the time.
3- Selling to a Friendly Buyer: If you’ve become emotionally attached to what you’ve built, even easier than liquidating your business is the option of passing ownership to another true believer who will preserve your legacy. Interested parties might include customers, employees, children, or other family members.
4- the Acquisition: Acquisition is one of the most common exit strategies: You find another business that wants to buy yours and sell, sell, sell. If you choose the right acquirer, your value can far exceed what would be reasonable based on your income. How do you select the right company? Look for strategic fit: Which acquirer can buy you to expand into a new market, or offer a new product to their existing customers?
5- the IPO (initial public offering): There are millions of companies in the U.S., and only about 7,000 of those are public. If you’re funded by professional investors with a track record of taking companies public, you might be able to do it. You start by spending millions just preparing for the road show, where you grovel to convince investors your stock should be worth as much as possible. (You even do a “reverse split,” if necessary, to drive up the share price.) Unlike an acquisition, where you craft a good fit with a single suitor, here you romancing hundreds of Wall Street analysts. If the romance fails, you’ve blown millions. And if you succeed, you end up married to analysts. You call that a life?
This is a small portion of the article titled “Exit Strategies for your Business” by Stever Robbins
Business Information Needed when Ready to Execute your Exit Strategy
You’ve built your business and now ready to execute your exit plan. When contacting your business consultant, they will ask for the following information to complete an offering memorandum outlining the details of the business.
- AR Aging Report
- AP Report
- Number of Customers in Database/Number of Active Customers/Customer Concentration
- Number of Suppliers of Vendors/Supplier/Vendor Concentration
- Vending Contracts
- Maintenance Contracts
- Lease/Purchase Agreements
- Corporate Employee Chart
- Employee Benefits Summary
- Corporate Documentation
- Corporate Insurance Policy
- Any Shareholders agreements
IF REAL ESTATE IS OWNED:
- Floor Plans
MISC ENGAGEMENT DOCUMENTATION:
- Partnership/Consent of Spouse or Corporate/Partnership Resolution
- Licenses & Permit Documents & Process to Obtain Licenses and Permits
- Copies of Patents, Trademarks, Copyrights, Etc.
- Description/Documentation of Technology being used
- List of products and services sold Top 5 Income Producing Items
- Any outstanding legal issues
Why a Business Broker – what do they do?
Most people don’t know what a business broker does. In fact, it is said 9 out of 10 people have no idea why the role of a business broker is so important in the successful transfer of a business from one owner to another. So how does having a business broker help in the sale of your business?
1- Confidentiality protects the seller from their customers, suppliers, employees and others from finding out their business is for sale until it has been sold. The potential buyers sign a non-disclosure agreement before knowing the name or location of the business.
2-Help provide a fair market value. Based on their experience from previous sales and knowledge of the market helps determine the highest purchase price possible.
3-Have experience in handling complex issues in the sales process and anticipating them before they arise.
4-Can help remove some of the the stress and emotional challenges in the sale of the business.
5-The business owner can continue running their business while the business broker handles the marketing and inquiries for the business transaction.
6-Prepare a professional marketing package to attract the best possible and qualified buyers.
7-Screen out the time wasters and unqualified buyers who will not be able to get financing..
8-Act as a referral source to other professional advisers used in the sales process, such as attorneys, accountants, lenders and others when needed.
9-Prepare all offers to purchase on proper legal forms without needing expensive legal staff to draw up the offer terms and conditions.
10-Assist in due diligence process in making sure the buyer is informed on all the financial aspects of he business.
11- Keep the process moving forward by coordinating the landlord assignment of the lease and other details before the closing.
12- At the completion of the sale, business broker’s get their ‘success fee’ for their efforts in getting the deal done.
If you are thinking of selling you business, contact our office by phone or email and one of our agents can help.